By Anthony Esposito and Rafael Escalera Montoto
MEXICO CITY (Reuters) – Most of the Bank of Mexico’s five governing board members agreed that the risks associated with U.S. President Donald Trump’s tariffs will add uncertainty to the future path of inflation, minutes of its March 27 monetary policy decision showed on Thursday.
Inflation forecasts remain uncertain, the board members noted in the minutes, adding that although the balance of risks for the trajectory of inflation remains biased to the upside, it has improved.
“The changes in economic policy by the new U.S. administration have added uncertainty to the forecasts,” the minutes noted. “Its effects could imply inflationary pressures on both sides of the balance.”
Mexico’s annual inflation sped up in March, up 3.80%, but remained within the central bank’s target range of 2% to 4%, data released on Wednesday showed.
The central bank’s inflation forecasts remain unchanged, however, and board members still expected headline inflation to converge to the target in the third quarter of 2026.
Board members pointed out that as a result of uncertainty around U.S. trade policies, there was now also a greater possibility of a further exchange rate depreciation and further economic weakening.
Banxico, as the central bank is known, delivered a unanimous 50-basis-point interest rate cut to 9.00% last month, highlighting progress on inflation but warning of heightened uncertainty relating to trade tensions and a weakening economy.
Some board members mentioned that weakness in the Mexican economic activity “is expected to have deepened in the first quarter of 2025,” said the minutes.
A first-quarter contraction would mark a technical recession, after the economy shrunk in the fourth quarter – its first quarterly contraction since the pandemic.
One board member underscored that the effects of the uncertainty resulting from U.S. tariffs were already reflected in an additional weakening of the Mexican economy.
(This story has been refiled to fix the second byline)
(Reporting by Anthony Esposito and Rafael Escalera Montoto; Editing by Stefanie Eschenbacher and Marguerita Choy)
